Figure 2: Recession Risk and the Excess Bond Premium

Note: Sample period: monthly data from January 1973 to March 2016. The solid line depicts the in-sample probability of an NBER-dated recession occurring at any point over the subsequent 12 months, implied by the probit specification in column 4 of Table 1; the dotted black line denotes the unconditional probability of entering into a recession at any point over the subsequent 12 months. Shaded vertical bars represent the actual NBER-dated recessions.

Sources: Authors' calculations (see the text and notes to Figure 1 for details).